McConnell: Senate Races ‘Extremely Close’; Says ‘Candidate Quality’ Key

Xi and Putin to attend G20 summit in Bali, says Indonesian president

Xi and Putin plan to be at G20. Chinese President Xi Jinping and his Russian counterpart, Vladimir Putin, both plan to be at November’s Group of 20 meeting in Indonesia, according to Joko Widodo, president of Indonesia, the host country for the Group of 20 summit in November. It would mark Xi’s first trip outside China since January 2020, before Covid became a pandemic. President Joe Biden, whose administration has been supporting Ukraine’s defense, is also expected to attend the G20 summit, and a meeting between him and Xi is also reportedly in the works.

China is taking several steps to address hot and dry conditions that have hit key areas of the county in July and continued into August. Details in China section.

A financier who fell out with China’s elite got a stiff prison sentence. A Chinese Canadian billionaire, Xiao Jianhua, whom the authorities picked up from his luxury Hong Kong apartment in 2017, pleaded guilty to bribery and other financial crimes. He was sentenced to 13 years in prison and his company was fined $8 billion. The Canadian embassy in Beijing had complained that its representatives were shut out of the courtroom during the trial.

Deere stock slid a few percentage points in premarket trading after the heavy equipment maker missed quarterly earnings estimates despite higher-than-expected sales. Deere earned $6.16 per share, below the consensus estimate of $6.69, as it successfully implemented price hikes but also faced higher costs. The company also cut its full-year forecast.

A new survey finds that business leaders say hackers pose a more significant threat than inflation or recession, listing growth as their biggest priority, while at least half say they are planning or implementing layoffs or hiring freezes. Details below.

Americans will soon shoulder the cost of their Covid-19 vaccines and tests, raising questions for millions of uninsured people.

The White House is ramping up its response to monkeypox by making 1.8 million more vaccine doses available, with states able to place orders on Monday. The acceleration comes as the U.S. clocks more than 13,500 cases of monkeypox and its parent class of virus, orthopoxvirus.

McConnell warns Republicans may not win Senate majority. Senate Minority Leader Mitch McConnell (R-Ky.), asked by reporters in Kentucky about his predictions for the midterms, said there is “probably a greater likelihood the House flips than the Senate. ... Senate races are just different, they’re statewide, candidate quality has a lot to do with the outcome.” McConnell predicted “an extremely close Senate – either our side up slightly or their side up slightly.”

Portions of the FBI affidavit used to secure a search warrant for former President Donald Trump’s Mar-a-Lago estate should be unsealed, a federal judge in Florida said. US Magistrate Judge Bruce Reinhart on Thursday gave the Department of Justice to propose by noon on Aug. 25 what information in the affidavit should be kept secret.

Equities: Global stock markets were lower overnight. U.S. Dow opened around 160 point lower. In Asia, Japan -0.04%. Hong Kong +0.05%. China -0.59%. India -0.85%. In Europe, at midday, London +0.19%. Paris -0.50%. Frankfurt -0.69%. The marketplace is eagerly awaiting next week’s Jackson Hole, Wyoming Federal Reserve annual symposium, including a speech from Fed Chairman Jerome Powell next Friday.

U.S. equities yesterday: The Dow rose 18.72 points, nearly 0.1%, to 33,999.04. The S&P 500 gained 9.70 points, 0.2%, to 4,283.74 after finishing lower Wednesday. The Nasdaq added 27.22 points, 0.2%, to 12,965.34.

Agriculture markets yesterday:

• Corn: December corn rose 3 3/4 cents to $6.15 3/4.
• Soy complex: November soybeans 15 1/2 cents to $14.05 1/4. September soymeal rose $8.80 to $449.40. September soyoil fell 115 points to 66.26 points.
• Wheat: September SRW wheat plunged 31 3/4 cents to $7.31 1/2, the contract’s lowest closing price since Oct. 13. September HRW wheat sank 38 1/2 cents to $8.12 1/2, the contract’s lowest close since Feb. 7. September spring wheat fell 30 3/4 cents to $8.52 3/4.
• Cotton: December cotton fell 84 points to 112.70 cents.
• Cattle: October live cattle fell $1.10 to $144.75. September feeder cattle fell $1.85 to $185.275. USDA-reported live steers averaged $147.48 so far this week, indicating prices will surpass last week’s average of $144.39.
• Hogs: October lean hogs fell the $4.75 daily trading limit to $93.30, the lowest closing price in nearly five weeks.
  

Ag markets today: Wheat futures were supported by mild corrective buying overnight, while corn and soybeans pulled back from yesterday’s gains. As of 7:30 a.m. ET, corn futures were trading 1 to 3 cents lower, soybeans were 12 to 16 cents lower and wheat futures were mostly 5 to 8 cents higher. Front-month crude oil futures were around $1.75 lower and the U.S. dollar index was about 500 points higher this morning.

Technical viewpoints from Jim Wyckoff:

On tap today:

• Richmond Fed President Thomas Barkin speaks on the economy at 9 a.m. ET.
• Baker Hughes rig count is out at 1 p.m. ET.
• CFTC Commitments of Traders report, 3:30 p.m. ET.

“We are in a housing recession,” said Lawrence Yun of the National Association of Realtors, after existing-home sales in the U.S. fell in July for a sixth straight month, the longest streak of declines in more than eight years, as higher mortgage rates and a shortage of homes for sale are cooling the sector. Sales of previously owned homes dipped 5.9% in July from the previous month to a seasonally adjusted annual rate of 4.81 million, the National Association of Realtors said Thursday. That was the weakest pace of sales since November 2015, excluding the three-month pandemic-related drop in the spring of 2020. July sales tumbled 20.2% from a year ago.

Mortgage rates also fell last week, as the 30-year fixed rate average dropped to 5.13%, down from 5.22% a week ago and up from 2.86% a year ago.

Fed officials continue to discuss September rate hike. On Thursday, St. Louis Fed President James Bullard said that given the strength of the economy he is currently leaning toward supporting a third straight 75-basis-point interest rate hike in September. Bullard told the Wall Street Journal, “I don’t really see why you want to drag out interest rate increases into next year,” and said he would ”like to get...to a target range of 3.75% to 4.00% by the end of this year.” Reuters adds that San Francisco Fed President Mary Daly “said hiking rates by 50 or 75 basis points at the Sept. 20-21 policy meeting would be a ‘reasonable’ way to get short-term borrowing costs to ‘a little bit above’ 3% by the end of this year, and on their way to a little bit higher in 2023.”

A new survey by PwC finds that business leaders say hackers pose a bigger threat than inflation or recession, listing growth as their biggest priority even while at least half say they are planning or implementing layoffs or hiring freezes. The survey of 722 U.S. executives found that just 30% said a recession poses a serious risk to their company, and 83% said they’re focusing their business strategy on growth, despite the growing threat of economic headwinds. Link for details.

Deere shares are down 5% premarket, after the maker of farming equipment reported lower-than-forecast earnings. Chief Executive John May said supply-chain complications harmed the company’s quarterly results, though profit still rose 13% in the three months through July. Total costs and expenses rose more than 23% to $11.56 billion, driven in part by inflationary pressures and a stronger dollar. Looking into the end of the 2022 fiscal year Deere said it sees net income of between $7 billion and $7.2 billion, down from its prior forecast of $7 billion and $7.4 billion.

Deadline for truckers, farmers and other owners of heavy highway vehicles is near. Form 2290 is due Aug. 31. Maximum $550-per-vehicle tax ($412.50 for logging vehicles) can apply to trucks, tractors, buses, etc., weighing 55,000 pounds or more. No tax is due if the vehicle is expected to be driven 5,000 miles or less (7,500 miles for farm vehicles), but you must still file the 2290 and list the vehicle. If you want more info, check this link for “Do I Need to Pay the Heavy Highway Vehicle Use Tax?”

Fertilizer crunch… again. European producers are again curbing operations because of rising prices of gas — a key feedstock — with at least a quarter of the region’s nitrogen fertilizer capacity thought to be lost already, according to Bloomberg. In China, a power crunch in the Sichuan province is stopping fertilizer output there. Most nitrogen prices are up after aggressive summer fill, yet they’re down sharply from spring highs, portending relief ahead of the U.S. fall season, Bloomberg Intelligence says.

High inflation is pushing the cost of raising a child to more than $300,000. A Brookings Institution estimate found that a married, middle-income couple with two children would spend an average of $18,271 a year to raise the youngest child born in 2015 through age 17. That is up more than 9% from a calculation based on the inflation rate two years ago.

Market perspectives:

• Outside markets: The U.S. dollar index was higher and hit a four-week high in early U.S. trading. The yield on the 10-year U.S. Treasury note is fetching 2.93%. Crude is under pressure, with U.S. crude around $88.90 per barrel and Brent around $94.60 per barrel. Gold and silver futures are under pressure, with gold around $1,764 per troy ounce and silver around $19.15 per troy ounce.

• IMF forecasts an additional $1.3 trillion in revenue for major oil and gas exporters such as Saudi Arabia, Qatar, Abu Dhabi and Kuwait over the next four years. The latest figure comes just days after Saudi Aramco booked a record-breaking quarterly profit of $48.4 billion. Link for details via the Financial Times.

• Renewables to grab nearly one quarter of generation this year. Renewable energy generation is expected to comprise 22% of U.S. electricity generation this year, according to a new report from the Energy Information Administration — a trend it expects to continue as more wind and solar come online. The EIA’s short-term energy outlook (STEO) sees an increase in U.S. renewables from previous years, which accounted for 20% of electricity generation in both 2020 and 2021. In 2023, EIA said, it expects renewables to account for 24% of total U.S. electricity generation. The two U.S. regions that saw the largest shares of renewable generation in 2021 were the Northwest, where renewables comprised roughly half of electricity generation, and California, where renewables accounted for a slightly smaller 44%. Link to report.

• The European Drought Observatory said a “staggering portion of Europe” is now exposed to high drought hazards, with 47% of EU land placed under the level of “warning” and 17% at the more severe “alert” level. Link to report.

• The U.S. gov’t announced $310 million in funding for 25 water recycling projects in an effort to combat a megadrought in the West. The funding comes from the bipartisan infrastructure bill signed by President Joe Biden last year, which included $8.3 billion for the Bureau of Reclamation for water infrastructure projects.

• Ag trade: Japan purchased 13,400 MT of feed wheat.

• NWS weather: Significant heavy rainfall event may lead to major flash flood impacts in the Southwest... ...More heat expected across interior California and the Pacific Northwest... ...Thunderstorms could become severe over the Midwest later today as thunderstorms and possible flooding rains spread across the Southeast and then up the Mid-Atlantic by the weekend.

Items in Pro Farmer’s First Thing Today include:

• Wheat firmer, corn and beans lower overnight
• China issues ‘yellow alert’ drought warning (details in China section)
• Russia lowers wheat export tax
• Placements key in Cattle on Feed data
• Light cash cattle trade
• October hogs extend sharp discount to cash index

— Summary: Russia warned of a man-made disaster at Zaporizhzhia nuclear plant in Ukraine, which it captured in March, and threatened to shut it down if shelling continued. That would risk “a radiation disaster at the largest nuclear power plant in Europe,” said Energoatom, a Ukrainian nuclear company. António Guterres, the U.N.’s secretary-general, likened it to “suicide.” On Thursday Russia’s foreign ministry rejected international calls to demilitarize the surrounding area. Russia is likely using the Zaporizhzhia nuclear power plant in southern Ukraine to shield its troops and equipment, undermining the safety of operations at Europe’s biggest atomic-power station, according to European intelligence officials.

• Ukraine’s grain exports sharply behind year-ago despite port reopenings. Ukraine has exported 2.99 MMT of grains since July 1, according to the country’s ag ministry, down 51.6% from the same period last year. The ministry data showed exports so far in 2022-23 included 1.94 MMT of corn, 783,000 MT of wheat and 257,000 MT of barley. Export volumes have picked up this month after three Black Sea ports were reopened on Aug. 1. Since then, Ukraine has exported 1.29 MMT of grain, though that’s still down sharply from 3.14 MMT during the same period last year.
• Ukraine’s wheat harvest nearing completion. Ukraine’s wheat harvest is 91% complete at 17.4 MMT, according to grain traders union UGA. It said total harvest of grains and oilseeds stood at 25.7 MMT, 2.3 MMT higher than the country’s ag ministry indicated. Ukraine’s government expects total production to be 65 MMT to 67 MMT, down from last year’s record of 86 MMT.

— FSA sending additional ERP applications under initial phase of program. Another 18,000 producers will be receiving pre-filled applications for assistance under the Emergency Relief Program (ERP) covering losses from natural disasters in 2020 and 2021. The installment of aid will reflect those with potentially eligible losses but had received crop insurance indemnities for those losses after May or were not included in the initial Phase 1 ERP effort for several reasons. Before program payment factors or eligibility criteria, FSA estimated the effort could generate about $756 million in assistance.

— Xiao Jianhua, a Chinese-Canadian billionaire financier, was sentenced to 13 years in prison by a Chinese court, on charges of bribing officials to evade financial scrutiny as well as illegally obtaining public deposits and breaching trust. His company, believed to have links to high-ranking politicians, was fined a record sum of 55 billion yuan ($8.1 billion). Xiao, seized from a Hong Kong hotel room in 2017, was tried behind closed doors in July.

— China issues ‘yellow alert’ drought warning. China has issued its first national drought alert of the year as authorities battle forest fires and mobilize specialist teams to protect crops from scorching temperatures across the Yangtze River basin. The national “yellow alert” issued late on Thursday is two levels below the most serious warning on Beijing’s scale. In one of the Yangtze’s important flood basins in central China’s Jiangxi province, the Poyang Lake has shrunk to a quarter of its normal size for this time of year, state news agency Xinhua reported on Thursday. As many as 66 rivers across 34 counties in the southwestern region of Chongqing have dried up, state broadcaster CCTV reported today. China’s water resources ministry has instructed drought-hit agricultural regions to draw up lists determining who can access supplies at any particular time, to ensure they do not run out.

Impacts: Since July, drought has affected roughly 821,333 hectares of farmlands in Sichuan, Chongqing, Hubei, Hunan, Jiangxi and Anhui, according to the Ministry of Water Resources. The report said heat is also posing a challenge for autumn grain production that accounts for 75% of China’s annual grain output. China has earmarked 200 million yuan ($29.5 million) for disaster relief funds and 200 million yuan to support agricultural production in drought-hit areas.

— Summary:

• Global Covid-19 cases at 594,265,277 with 5,448,582 deaths.
• U.S. case count is at 93,403,244 with 1,039,745 deaths.
• Johns Hopkins University Coronavirus Resource Center says there have been 607,588,353 doses administered, 223,684,995 have been fully vaccinated, or 67.89% of the U.S. population.

— Biden administration is planning for an end to its practice of paying for Covid-19 shots and treatments, shifting more control of pricing and coverage to the healthcare industry in ways that could generate sales for companies — and costs for consumers. A planning session on Aug. 30 is set to bring together drugmakers, pharmacies and state health departments with a stake in the Covid-19 treatment industry for discussions about reimbursement and coverage, regulatory issues and access for the uninsured.

— How Senate Minority Leader Mitch McConnell (R-Ky.) sums up Senate elections: “I think there’s probably a greater likelihood the House flips than the Senate. Senate races are just different — they’re statewide, candidate quality has a lot to do with the outcome. … Right now, we have a 50-50 Senate and a 50-50 country, but I think when all is said and done this fall, we’re likely to have an extremely close Senate, either our side up slightly or their side up slightly.”

— Election-watcher sizes up Nov. 8 elections. Amy Walter of the Cook Political Report writes: “After months of ‘Democrats are doomed’ chatter, there’s been a definite shift in mood and momentum toward the party in power. Republicans are openly fretting about their flawed and under-funded Senate candidates, while Democrats, who not long ago were bemoaning fumbles by the White House and Democratic leadership in Congress, are now sharing ‘Dark Brandon’ memes and polling data showing Democrats ahead in key Senate contests.”

— Cotton AWP back above $1 per pound. The Adjusted World Price (AWP) for cotton rose to 101.90 cents per pound, effective today (Aug. 19), up from 88.15 cents per pound the prior week and back above $1 per pound following two weeks below that mark. Meanwhile, USDA said that Special Import Quota #18 will be established Aug. 25 for the import of 58,062 bales of upland cotton, applying to supplies purchased no later than Nov. 22 and imported into the U.S. no later than Feb. 20.

— A federal judge in Florida said he would probably unseal part of the affidavit detailing the FBI’s justification for searching Mar-a-Lago, Donald Trump’s estate. He gave the agency a week to decide which parts to redact. The FBI has argued that releasing the affidavit would undermine its investigation into whether the former president mishandled classified documents, by dissuading witnesses from co-operating.

— EPA: Despite stricter rules, thousands of complaints of dicamba damage. In draft risk assessments (link), the Environmental Protection Agency (EPA) said that “despite the new control measures,” it received nearly 3,500 incident reports in 2021 of damage to crops that were not genetically engineered to tolerate the chemical and to “non-target plants in non-crop areas.” The agency said there was little risk to most people from exposure to dicamba, though it identified six additional instances in which workers handling the herbicide should wear a respirator along with the required outfit of long pants, a long-sleeved shirt, socks, shoes, chemical-resistant gloves, and protective eyewear. “We believe the decision today will be protective of other farmers’ crops,” said EPA administrator Andrew Wheeler, announcing the new rules and the approval of dicamba through 2025 at a farm in Georgia. EPA compiled the draft risk assessments as part of a review of the pesticide required by law every 15 years. It said public comment on the documents would be accepted through Oct. 17.